As we enter the “golden quarter” of 2020, it’s interesting to see the impact of current market conditions, driven by the pandemic, on multi-channel retail plans for the peak season. Despite a significant drop at the beginning of lockdown, both GDP and retail sales in the UK have bounced back in a full V-shaped curve during July and August. In fact, UK online retail sales in August were up 43.5% compared to last year. However, now is not the time to become complacent.
We recently met with 15 UK multi-channel retailers to learn how they see the next few months unfolding, and how they are planning to make the most of the opportunities – and overcome the challenges – that lie ahead.
1. Black Friday offers will appear earlier than usual…
With Prime Day undergoing a strategic shift to October this year, and rumours rife that Amazon will start Black Friday deals as early as 26 October, many retailers plan to take advantage of an earlier peak season by offering a range of promotions between now and the end of the year, from mid-season sales to Black Friday events and festive offers.
Not only will these promotions occur earlier than normal, but they are also predicted to stretch out further. Apart from giving consumers a wider window of opportunity to benefit from deals before Christmas, this will also ease the pressure on delivery companies who are predicted to be overstretched this year.
However, there is a word of warning: an early peak season could result in a pre-Christmas slump, which is likely to occur during the first two weeks of December. Therefore, it’s important not to focus too heavily on Black Friday deals, but to entice consumers to continue spending well into December. Some brands are worried that stock levels may not hold out until Christmas, and in a bid to improve margins, are considering making promotions much less generous this year.
2….. but ‘Christmas is coming’ even earlier for retailers
Many retailers who would normally push out their Christmas range from November onwards have started to stock festive items as early as August or September in order to test the market. Whether it’s due to knee-jerk reactions to some of the more sensationalised headlines we’ve been seeing in recent months, or simply consumers planning earlier than ever, retailers are already enjoying a 30-40% uplift in sales of Christmas items – without any promotion – as we head into October.
With a socially distanced Christmas on the horizon, online retailers expect gift wrapping to be in demand this year. Some have experienced high demand already, with one retailer reporting 55 gift-wrap orders this September, compared to just 7 last September. Another retailer has increased the volume of its warehouse wrapping paper order by 1,000% to meet predicted demand. Retailers are also reporting an increase in the number of customers providing a separate delivery address to their billing details.
3. E-commerce is on the up, leaving a quiet high street
With many of us reluctant to venture out unnecessarily, it looks as though online sales will only continue to soar this peak season. In fact, latest figures from ONS indicate that online sales during August 2020 accounted for 26.5% of all retail sales (compared with only 21.6% during the 2019 peak season). Similarly, recent research has revealed “almost three-quarters (71%) of shoppers will be put off doing their shopping in-store this Christmas due to Covid-19 restrictions”, and that over a third (37%) of Brits “will avoid physical shopping locations as much as possible over the festive period”.
In terms of advertising and marketing, all channels seem to be working well for retailers currently, with reported highs across direct mail, but also across social and paid search, such as PPC. Despite the rise in online commerce, retailers are still keen to allocate a proportion of their budget to traditional media, such as off-the-page advertising, which is really helping to drive product awareness this season.
4. Local lockdown limitations could further disrupt delivery
The pandemic has already put pressure on UK and overseas delivery networks this year, and with virus outbreaks continuing – as well as restrictions to control the number of individuals in stores and shopping centres – the impact on peak season deliveries could be significant.
Even during the 2019 peak season (i.e. before the pandemic), carrier networks struggled to meet demand. While capacity has been increased by the carriers for peak 2020, there are concerns that it won’t be enough to cope with the growth predicted for e-commerce this year either, with many retailers reporting a limited choice of couriers. Some delivery issues could be inevitable. To prepare for this, retailers have already begun to strengthen their relationships with couriers to foster last-minute flexibility – with those who communicate frequently with their providers more likely to get ahead in the queue – as well as tweaking their delivery options with customers to allow for longer delivery times.
As we head rapidly towards a Black Friday and Christmas like no other, it’s clear there is a great deal of unpredictability ahead for multi-channel retail brands to throw plans off course – so agility and flexibility to respond to change will be key. But armed with the foresight to manage customer expectations around stock availability and delivery, and, of course, order in sufficient volumes of wrapping paper, online retailers have a huge opportunity ahead for a prosperous peak season.
